Archive for the ‘protectionism’ Category

Since he became President of the united States, what world leader gave Barack Obama real substantive advice? Arguably, Hu Jintao of China, who cuationed the president about the “buy American” provision in the economic stimulus plan.

Buy American sounds good to many voters, as they watch jobs go away, local industries close and Wal Mart fill with foreign made good that used to be “made in America.”

But to President Hu in China and Angela Merkel in Germany and a host of other world leaders, “buy American” is protectionism, a hinderance to world trade and a violation of just about every international free trade agreement.

Nancy Pelosi and her House colleagues put buy American into the stimulus, and judging from radio call in shows most Americans buy it.

So President Obama will have yet one more challenge to ecplain why “buy American” is not good for the U.S. and the world…

Dallas Federal Reserve President Richard Fisher cautioned Monday that protectionist tendencies are dangerous, calling them the “crack cocaine” of economics.

Speaking on C-Span, Fisher addressed a proposed congressional fiscal stimulus law that would offer “Buy America” provisions in an effort to encourage the purchase of domestic goods. However, such provisions are dangerous, Fisher warned. “Protectionism is the crack cocaine of economics … (it) leads to economic death,” he said.

“We just cannot afford to go down that path,” Fisher added.

The Dallas Fed President just concluded his term as a voting member of the Federal Open Market Committee. Known as one of the most ardent inflation hawks in the nation’s policymaking body, Fisher added in his comments that failure to remove added liquidity from the system in a timely manner could result in serious price inflation.

The Federal Reserve needs to be cautious that their excessive lending and record low interest rates, set at a target range between zero and 0.25 percent, Fisher said, warning that an inflation problem could be “baked” into the country’s economic outlook.

Speaking at a meeting with former British Prime Minister Tony Blair, Wen said as international financial crisis is spreading, his visit to London was to send a message of confidence for Britain and China to join hands in overcoming current difficulties.

He noted that the two sides should further explore the potential for cooperation, and guard against trade protectionism, in particular.

In 1930, Congress fired the first shot in a protectionist battle that prolonged and deepened the Great Depression. After passing a bill aimed at saving American jobs by effectively barring 20,000 imported goods, including French dresses and Argentine butter, other nations retaliated by raising their own barriers on U.S. products, effectively bringing global commerce to a halt.

In the aftermath, organizations like the World Trade Organization sought to ensure that never happened again. Nations agreed to put on economic straitjackets permitting them to raise tariffs within hard-fought limits. That is likely to help prevent a repeat of the devastating and overt trade wars seen during the Great Depression, since it is now far harder for nations to increase tariffs on a wide array of imports at once.
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But there remains a surprising amount of wiggle room in international trade and commerce treaties, and that, analysts say, is where the battle is now being fought as leaders worldwide face intense pressure at home to protect domestic jobs in the deepening financial crisis. They are engaging in a more subtle form of protectionism that often skirts those rules.

This weekend at the World Economic Forum in Davos, Switzerland, the annual event drawing the world’s leaders, luminaries of industry, commerce and philanthropy, a host of dignitaries raised a crescendo of alarm over growing economic nationalism. “We will resolutely fight protectionism,” Japanese Prime Minister Taro Aso told reporters there, giving voice to the general sentiment.

Yet even as leaders call for nations to do the right thing on the international stage, actually doing it at home is proving far tougher.

British Prime Minister Gordon Brown, for instance, delivered a particularly impassioned plea for nations to remain on the path of free trade yesterday. “This is not like the 1930s. The world can come together,” he said. However, back in Britain, the government is directing British banks with global operations now being rescued with taxpayers’ dollars to boost lending to British businesses and citizens first.

President Barack Obama’s administration will examine a “buy American” requirement in economic stimulus legislation that has raised concern among U.S. trading partners, White House press secretary Robert Gibbs said.

The administration “will review that particular provision,” Gibbs said today at his regular briefing. The president’s advisers understand “all of the concerns that have been heard, not only in this room, but in newspapers produced both up north and down south.”

He refused to say whether the administration supported or opposed keeping that part of the legislation intact. Nor did he say what the president would do if the provision remains once the bill clears the House and the Senate.

The issue may cloud Obama’s trip to Canada on Feb. 19, his first journey outside U.S. borders as president. Officials in Canada, the top U.S. trade partner, are criticizing a part of legislation that passed the U.S. House of Representatives Jan. 28 that requires the use of U.S.-made iron and steel in infrastructure projects.

“U.S. protectionism is about to make Canada’s recession a lot worse,” Ralph Goodale, house leader for the opposition Liberal Party, said today in Parliament.

Americans just started a new presidency but in China, Russia, France, Iceland and Britain, some leaders already fear that the worsening global economy will result in calls for new governments with new leaders and ideas.

Protesters in Rusia’s eastern most industrial hub and seaport, Vladivostok, called this week for new government leaders because of the economic down turn.

James Hill for The New York Times

The protest was peaceful; but more protests are planned. And previous protests like this one in Russia ended in violence and the police making dozens of arrests.

The crowd called for the replacement of Dmitri Medvedev and Vladimir Putin, Russia’s top leaders, for mismanaging the economy.

On Saturday protesters held demonstrations throughout Russia, offering largely subdued, but pointed criticism of the government’s economic policies as the country continues to sink deeper into an economic morass, the New York Times said.

In Britain, Prime Minister Gordon Brown is under fire. He is currently taking heat for a jobs and rights protest that stems from his pledge that “British jobs need to be British.”
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Thousands of workers across Britain have walked off their jobs following protests over the use of foreigners at a Lincolnshire oil refinery.

On Saturday, the number of strikers multiplied, with hundreds of energy workers across the UK protesting — and with lines of police around them.

And millions of Chinese have gone home for the Spring Festival or New Year and told not to return to their jobs. China is so worried about domestic unrest that it has started its largest anti-democracy crackdown ever: specifically targeting the media and Internet.

“People have this psychology of crisis,” said Victor Yuan, chairman of Beijing-based consultant Horizon Research Consultancy Group, which does polling for the private sector and the government.

Horizon’s latest survey showed consumer confidence at its lowest since the outbreak of severe acute respiratory syndrome, or SARS, in 2003.

“The real, real winter for the Chinese economy hasn’t come yet,” said Chen Jian, chairman of Hangzhou Hengwei Investment Co., which has business in restaurants, real estate and trading.

In France, President Sarkozy can’t get away from the jeers and shouts of protestors when he makes public appearances. He has taken to firing public officials that don’t keep protesters far away from the President’s ears.

A crowd of 300,000 protested in Paris this week in the largest protest in 10 years, some said.

Paris this week

Countries such as France and Greece have been hit by riots and strikes as militant unions demand protectionist measures to keep out foreign rivals.

And both Germany and China expressed fears of American protectionism this week. Angela Merkel of German told audiences at the economic conference in Davos that the U.S. auto bailout hurts the global economy and spells a new era of protectionism from the U.S. China’s Hu Juntao told President Barack Obama that the “buy American” provision in the stimulus was rank protectionism and needed to be scuttled.

The economy has made the entire world more tense.

The French Finance Minister Christine Lagarde said, “We’re facing two major risks: one is social unrest and the second is protectionism.”

“We need to restore confidence in the systems and confidence at large,” she added.

Lagarde

Former U.N. Secretary-General Kofi Annan says the world body needs to be reorganized in view of the economic crisis.

“The current architecture of managing global affairs is broken and needs to be fixed,” Annan said.

The worldwide economic recession has exposed a “crisis of global governance” that can only be addressed by the radical reform of the United Nations, said Mr. Annan.

And Britain’s Prime Minister Gordon Brown has called on world leaders to set about reforming international financial institutions to prevent a repeat of the circumstances that led to the current financial crisis.

“We’ve got to be far bolder and far more imaginative,” Brown said. “We want to create a global society. But we need to have global institutions that work and the problem is the institutions we built 60 years ago are out of date.”

China’s president urged better ties with the United States in his first phone conversation with President Barack Obama, and called for both sides to resist trade protectionism, Beijing said Saturday.

Friday’s conversation, 11 days into Obama’s presidency, followed sharp exchanges between the two sides over China’s currency policy, amid criticisms that China manipulates its yuan to boost its exports overseas.

AFP

An account of the conversation issued by the Chinese foreign ministry quoted President Hu Jintao telling Obama that China would work toward a “more constructive China-US relationship.”

Hu told Obama China welcomed US efforts to shore up the American economy, but warned against moves toward protectionism, the statement said.

German Chancellor Angela Merkel and British Prime Minister Gordon Brown argued for tougher control of the international economy, opening up a potential split with the United States on ending the financial crisis.

AFP

Merkel said a UN economic council based on the UN Security Council may have to be created to police the global economy, while Brown said his “shared revolution” would strengthen current international institutions.

Both proposals went counter to US ideas rejecting any global enforcer. At a Group of 20 summit in November, Washington fought for national regulators to take precedence.

Brown and Merkel set out the case for greater international control at the World Economic Forum in Davos, both looking forward to a new G20 summit on the crisis to be held in London in April.

The British prime minister, his concentration broken by his own mobile phone ringing during a press conference, called for “a shared revolution in common action to deal with real problems.”

Secretary of StateHillary Rodham Clinton has said no nation is more important to the United States than China. But ties between the two powers may be off to a rocky start just days into the Obama administration.

In his inaugural address Tuesday, President Barack Obama spoke of how earlier generations of Americans had “faced down fascism and communism.” China’s state broadcaster quickly faded out the audio of its live broadcast, the camera cutting back to a flustered studio anchor.

Then, on Thursday, Obama’s choice to lead the Treasury Department, Timothy Geithner, wrote that Obama believes China is “manipulating” its currency, which American manufacturers say Beijing does to make its goods cheaper for U.S. consumers and American products more expensive in China.

Chinese officials closely follow U.S. political rhetoric and frequently decry what they consider foreign interference in China’s internal affairs. The United States often criticizes China about human rights and trade abuses, but Washington and Beijing find themselves increasingly intertwined in a host of crucial economic, military and diplomatic efforts.

By FOSTER KLUG, Associated Press Writer

State media in China reported Saturday that a deputy governor of China’s central bank dismissed Geithner’s comment. Su Ning was cited as saying by the official Xinhua News Agency that the remarks were “not in line with the facts.”

“We thought in the face of the financial crisis, there would be a spirit of self-criticism beneficial to finding ways of resolving the issue and overcoming the crisis,” Su said, adding that it was imperative to avoid any excuses to encourage trade protectionism.

Earlier, China’s foreign minister, Yang Jiechi, said Beijing was committed to working with the Obama administration to strengthen ties and cooperation.

Selig Harrison, director of the Asia program at the U.S.-based Center for International Policy, said it was “very ill-advised for the new administration to confront China as if this were 10 years ago and we were in a strong financial position internationally.”

“We are dependent on Chinese goodwill for our economic survival and viability, and, therefore, it seems to me that this type of posture is very risky,” he said.

Despite an early face-off with China over an intercepted U.S. spy plane, former President George W. Bush made it a priority to strengthen relations with China while also pushing the country to live up to what he considered its duties as an emerging global superpower and a veto-holding member of the U.N. Security Council.

Trade ties between the United States and China often are tense. China says it has made progress on currency changes and worries about bills introduced in Congress that would impose economic sanctions on China unless it moves more quickly to let its currency rise in value against the dollar.

Although Geithner said China is “manipulating its currency,” he suggested Thursday that now might not be the right time to brand Beijing as a currency manipulator under U.S. trade law, which could lead to U.S. trade penalties against imports from China.

Whether it was a shot across the bow or a simple restatement of his boss’s views, Timothy F. Geithner’s assertion that China “manipulates” its currency has complicated a crucial front in President Obama’s efforts to improve America’s relations with the world.

China experts here said there were several other signs that the Obama administration could take a harder line toward Beijing, including Mr. Obama’s emphasis on climate change and the environment in trade negotiations and Secretary of State Hillary Rodham Clinton’s focus on human rights.

The Chinese Ministry of Commerce responded tartly to the charge by Mr. Geithner, Mr. Obama’s nominee for Treasury secretary. “Directing unsubstantiated criticism at China on the exchange-rate issue will only help U.S. protectionism and will not help towards a real solution to the issue,” the ministry said late on Friday in a statement to Agence France-Presse.

China starts off on weaker footing with Mr. Obama than it did with his predecessor, George W. Bush. Mr. Bush and his last Treasury secretary, Henry M. Paulson Jr., cultivated Chinese leaders and refused to call Beijing a manipulator. Mr. Obama has little personal experience of China, and lacks senior advisers with a deep interest in or knowledge of the country. With the American economy in a deep slump, and China trying to ramp up its exports to cushion a sharp slowdown there, experts worry that trade relations between the countries could deteriorate.

By Mark Landler
The New York Times

If the United States repairs its image in many parts of the world, that could make it harder for the Chinese to present themselves as an alternative to American influence in Asia, Africa, and elsewhere.

“The Chinese are probably one of the few people in the world who were sorry to see President Bush go, and are nervous about his successor,” said Kenneth G. Lieberthal, a visiting fellow at the Brookings Institution who worked on China policy for the Clinton administration.

“They saw the Inaugural Address as having some uncomfortable elements for them,” Mr. Lieberthal said. “They are uneasy about Hillary Clinton. She has, in their assessment, not been a friend of China.”

The Chinese news media played down the significance of Mr. Geithner’s remarks, which were made in writing to the Senate Finance Committee as part of the confirmation process.

Rather than dwell on or analyze the reference to China’s currency, the Chinese official newspaper, The People’s Daily, quoted Mr. Geithner as saying that the currency manipulation issue would take a back seat to working with China to alleviate the global financial crisis. The headline said, “U.S. Treasury secretary-designate vows to deepen U.S.-China economic ties.”

BEIJING (Reuters) – A Chinese central banker denounced accusations by U.S. Treasury Secretary-designate Timothy Geithner that China was manipulating its yuan currency, calling them misleading and warning against “excuses” for protectionism.

Su Ning, a vice governor of the People’s Bank of China, called the comments by Geithner “out of keeping with the facts” and said they were “misleading in analyzing the causes of the financial crisis,” the official China News Service reported on Saturday.

Su also warned against trade protectionism.

“We believe that faced with the financial crisis there should be a spirit of self-criticism,” Su said while visiting a business newspaper office in Beijing, according to the report.

“The international community is currently working together in actively responding to the financial crisis, and it must avoid exploiting different excuses for renewing or encouraging trade protectionism,” Su said, adding that such steps would harm global economic recovery.